Good business climate, not so good economy

The well-respected Tax Foundation recently released their 2015 State Business Tax Climate Index report. Michigan is rated the 13th best business climate in the country. The same ranking Michigan had in 2013 and 2014. In 2012 the state ranked 27th. So on the measure we are told repeatedly by Lansing policy makers and the business community that is the key to the more and better jobs Governor Snyder has established as the state’s economic priority the state has made lots of progress and is an upper tier state.

One problem. You can’t pay the bills or save for you retirement or the kids college education with a business climate ranking. What matters to everyday Michiganders is jobs and income. And on that as we have explored in recent posts (here and here) Michigan is anything but a top tier state. In fact we are now structurally a poor state.

37th in per capita income (the best measure of a community’s economic well being), 41st in per capita income minus transfer payments and 42nd in the proportion of 25-64 years olds with a job. With falling wages, now five percent below the national average. With almost no improvement on any of these metrics from three years ago when we had a much worse business climate rating.

What about Minnesota the state with the best economy in the Great Lakes? They rank 47th in this year’s business tax climate report. They were 44th in 2012, 45th in 2013 and 47th in 2014. But in what matters to everyday Minnesotans they are 13th in per capita income and third in the proportion of adults 25-64 year olds with a job.

Minnesota’s 2013 per capita income is $47,500 compared to $39,055 for Michigan. In 2013 80.1 percent of Minnesotan age 25-64 worked compared to 69.0 in Michigan. Any of you willing to trade higher income and more jobs for a better business tax climate rating?

The authors of this year’s business tax climate report highlight New Jersey as having particularly bad tax policy. They write: “The states in the bottom ten suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates. New Jersey, for example, suffers from some of the highest property tax burdens in the country, is one of just two states to levy both an inheritance and an estate tax, and maintains some of the worst structured individual income taxes in the country.”

New Jersey is last in this year’s report. They have been last or next to last for each of the last four reports (2012-15). If business tax climate matters as much as our policy makers and business community tells us it does, New Jersey residents should suffer from high unemployment and low incomes. Think again! New Jersey is third in per capita income and 20th in the proportion of 25-64 year olds working.

Seems like its time for Michigan to learn from states like Minnesota and New Jersey, states that have higher income and more working age adults with a job. Becoming more business friendly isn’t getting us the more and better jobs we were promised. Its time for Michigan to get a different path back to prosperity.

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.